Paper industry 2021: Significant upswing overshadowed by cost explosion

The industry is very concerned about the supply of gas in connection with the war in Ukraine.

As the association DIE PAPIERINDUSTRIE announced in its annual report, the production of paper, cardboard and paperboard increased by a remarkable 8.3 percent from 21.3 to 23.1 million tonnes across all types in 2021. Compared to 2020, the sector's turnover rose significantly by 22.8 per cent from 12.6 billion euros to 15.5 billion euros. This also exceeded the values of the pre-Corona year 2019. At that time, the industry had produced 22 million tonnes of paper, cardboard and paperboard and turned over 14.3 billion euros.

Paper and board for packaging - with 58.7 per cent production share the largest group of grades - was above average with a plus of 9.0 per cent. Demand from the booming online trade and the increasing switch from plastic to paper packaging played a role here.

With an equally significant increase of 9.0 per cent, graphic papers (production share 28.4 per cent) were also able to grow strongly again for the first time after a decline of several years. This was due to the significant increase in demand from retailers for print advertising, which is intended to stimulate consumers to consume more again after the lockdown phase. However, due to the shrinking production capacities for printing paper throughout Europe in recent years, there were temporary supply bottlenecks. The hygiene papers (production share 6.4 per cent) had to record a slight decline of two per cent after the hoarding purchases of 2020. Technical and speciality papers (production share 6.5 per cent) developed extremely positively with a plus of almost 11 per cent. Demand was driven primarily by decorative papers for furniture and technical papers for industrial use.

However, the growth in production in the paper industry is overshadowed by an explosion in the cost of energy and raw materials: Prices for waste paper have doubled on average, the costs for gas, the most important energy source for the paper industry, have increased fivefold at their peak, and electricity has quadrupled in some cases. According to a survey by the association, many companies see difficulties in passing on the increased costs to their customers. About 30 per cent therefore even consider temporary production stops possible. Additional uncertainties are created by the discussion about gas supplies in connection with the Russian invasion of Ukraine. The companies expect a concept from the politicians as soon as possible on how to ensure security of supply in the event of a crisis.